President Obama: Second Term, Climate Hawk Emerges

“We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations…The path towards sustainable energy sources will be long and sometimes difficult. But America cannot resist this transition; we must lead it.”- President Barack Obama, 2013 Inaugural Speech

For climate change and clean energy advocates, these words are a cause for celebration no matter how brief. After two years of policy inaction, the President dedicated 13 lines – more words than any other issue – on the need to address climate change. On January 21, 2013, the President emerged as a born again climate hawk.

Moving forward, the President has a number of policy paths to choose from, many of which potentially offer the same fate as 2010’s climate change push when cap-and-trade was the policy du jour.

In particular, advocates less inclined to pitch another battle similar to the cap-and-trade debate are most interested in implementing climate policy through regulatory actions. This typically means utilizing existing EPA Clean Air Act authority to regulate carbon emissions from electricity generation plants. More specifically, the EPA could expand its regulations to cover existing power plants (it is already set to regulate new power plant emissions), which produce nearly 40 percent of U.S. emissions. But as Washington Post reporterBrad Plumer puts it, doing so won’t be easy because, “using the Clean Air Act to regulate carbon dioxide could prove legally dicey, especially if the EPA pursues sharp cuts.” Like any energy policy that could potentially raise energy prices, “many utilities are likely to oppose these regulations, which [the Natural Resources Defense Council] expects to cost some $4 billion per year.”

image via White House

The same can be said if the President wants to take another stab at putting a price on carbon. The 2010 cap-and-trade debate showed the limits consumers place on paying more for energy, in this case more expensive clean energy) and the immediate push-back the President can expect if implementing a carbon price, either through cap-and-trade or a carbon tax. While both are largely considered dead-on-arrival in Congress at this moment, there is some momentum for implementing a smaller carbon tax (< $20/ton CO2) as part of a larger push to reform the tax code. The bipartisan trade-off: implement a budget-neutral carbon tax off-set by lowering income or corporate taxes elsewhere.

But doing so as the central U.S. climate policy, poses an immediate problem: a modest carbon tax, by itself, cannot drive carbon emissions to zero. At modest levels (e.g. a $20 carbon tax raises gas prices only $0.20 cents), carbon pricing is more of a complementary policy that can help deploy more clean energy that is very close to competitiveness, but it won’t be able to facilitate transforming the U.S. energy system without significantly more policy support aimed at clean energy innovation.

In other words, if the President is serious about tackling climate change it’s going to take much more than many of the options most talked about in advocacy circles. In fact, both options above hold the potential of sabotaging any climate policy push by focusing consumer, voter, and political attention on the potential for higher energy costs – one of the main reasons the original cap-and-trade legislation received so much push-back – and leading to prolonged climate inaction.

In addition, both options offer limited climate change mitigation potential compared to the high political costs of getting each passed into law. We must keep in mind that we’re talking aboutglobal warming not America warming. If the United States immediately stopped consuming fossil fuels – at significant economic and competitive costs – the Earth would continue to warm because of the substantial growth in carbon emissions from the developing world. We simply cannot expect developing countries – many simply wanting access to energy of any kind – to take on more expensive clean energy options when cheap fossil fuels offer immediate economic benefits.

Taking these super wicked problem characteristics into account, requires a new way of framing climate policy solutions: less talk of mandates and higher energy costs and more talk on building competitive clean energy solutions that all Americans (and the rest of the world) can implement.

One such approach is to make clean energy innovation the guiding north star of our climate policy choices. I’ve talked about a number of ideas that could be included in a climate innovation strategy on this blog, but here are two top-level ideas that could make up the beginning of a package of ideas to build on moving forward:

First, the President should tie the shale natural gas boom to building the clean energy future by creating a dedicated tax on natural gas and oil drilling that is earmarked for a clean energy innovation trust fund. Shale gas benefited from decades of public investments in innovation and clean energy is no different, but one of the starkest comparisons between the two is that shale gas innovation received dedicated funding through a rate-payer surcharge. This pitfall is most evident in the boom-and-bust trends in public investments for clean energy R&D, tax incentives, and demonstration projects that slow down or halt innovation. The tax should be enough to leverage doubling the federal clean energy innovation budget – which currently stands at roughly $14 billion – and would include tripling investments in clean energy research, development, and demonstration.

Second, the President should lead the charge for reorganizing the U.S. Department of Energy (DOE) and reforming the National Labs system to spur clean energy innovation and enhance implementation of technologies from research to market. For instance, the DOE is already quietly reforming itself from in by expanding innovative management practices implemented four years ago through ARPA-E. The President should work to accelerate these reforms as well as proactively reorganize the agencies research offices to eliminate technology stovepiping and provide the Labs maximal flexibility to partner with industry to move research to market. The President could get even more aggressive by proposing new clean energy deployment policies that explicitly tie research to market outcomes, such as through a Race to the Top energy program, or the creation of regional energy innovation consortia.

These innovation proposals aren’t as splashy as a new EPA regulation, but they’re aimed at the central problem: we need better and cheaper clean energy technologies that provide consumers everywhere an economical alternative. As such, Brad Plumer was correct in stating that the federal government must take the long view on climate change – we need to get to zero carbon in forty years. As the President weighs his options in the coming months, he’s offered by picking and choosing from two columns of policy choices: (1) the modest steps most talked about in advocacy circles are politically contentious and offer limited climate benefits. (2) An energy innovation strategy offers less political barriers and substantially more climate benefits in the long-run.

The Information Technology and Innovation Foundation (ITIF) is a non-partisan research and educational institute – a think tank – whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues.